RPT-China media train fire on U.S. food giants over chicken scare

By Kazunori Takada and Samuel Shen

SHANGHAI Jan 17 (Reuters) - Just weeks after Chinese
authorities cleared Yum Brands Inc and McDonald's Corp
of charges they had served chicken laced with excessive
chemicals, local media are again attacking the iconic American
firms, while barely reporting on the chances of Chinese
restaurants selling similar meat.

The official Shanghai Daily, citing a report from the
central government's news portal china.com.cn, said on Thursday
one of China's largest suppliers to McDonald's and Yum's KFC and
had bought sick chicken from farms and sold them to the food
outlets - a claim a local government in the central province of
Henan said was untrue after a preliminary investigation.

Chinese newspapers and websites have also criticised some
domestic firms, but industry experts say multinationals are
hotter targets given the high profile of their brands.

"KFC and McDonald's get media attention because they're the
biggest fast-food chains in China. Everyone knows them and
everyone talks about them," said Tan Xiaoxue, a reporter at
Sohu.com Inc's news portal.

"There are some local chains such as Country Style Cooking
, but they cannot be compared with international brands,
which have much bigger brand recognition and consumer impact."

In the latest chicken scare case, china.com.cn quoted an
unidentified official at Doyoo Group - which sells chicken to
KFC and McDonald's - plus employees at Doyoo's suppliers as
saying chicken that fell ill were slaughtered and shipped to
fast food restaurants including the two American giants.

However, the government of Doyoo's home city Hebi said on
Wednesday that it had found no evidence of this in a preliminary
probe, and authorities were looking into the case more closely.

In response to the china.com.cn report, Yum's China unit
said it will closely monitor the situation.

"If Doyoo is found to have committed any wrongdoings, it
will be subject to severe punishment," it said via its official
microblog account.

Officials at McDonald's in China and at Doyoo could not be
reached for comment despite repeated calls by Reuters.

SCATHING EDITORIAL

Last week, Yum warned that sales in China - where it earns
over half of its worldwide revenue and operating profit - shrank
more than expected in the fourth quarter, citing bad publicity
from a government review of its chicken supply.

The firm has been embroiled over the past month in a scare
triggered by an official China Central Television report which
said some chicken supplied to KFC and McDonald's contained
excess amounts of antiviral drugs and growth hormones.

On investigation, the Shanghai Food and Drug Administration
found the levels of antibiotics and steroids in KFC chicken were
safe, though the watchdog found a suspicious level of an
antiviral drug in one of the eight samples tested.

Yum apologised last week to customers over the handling of
that scare, but state-run Xinhua news agency immediately weighed
in with an editorial on Saturday slamming the U.S. firm.

"Yum's understated apology is rooted in its arrogance and
propensity for unfairly treating Chinese consumers, who usually
regard foreign brands as being safer and of higher quality than
domestic brands," Xinhua said.

"Other multinational companies have displayed the same
attitude, capitalizing on loopholes in Chinese law and
regulations to escape punishment."

Kevin Der Arslanian, a business analyst at China Market
Research Group in Shanghai, said the government is taking a firm
stance against foreign companies especially in the food sector
given high public concerns over safety.

"They are being harsh on them to show that they are aware
of these worries when it comes to food safety," he said.

"I don't think it's unfair that they're specifically
targeting foreign brands. These foreign brands and KFC in
particular have positioned themselves as extremely healthful and
extremely high quality, and therefore if there are scandals it
is only fair that they be hit the hardest."

Still, not all local news outlets are joining the attack.

Chen Xiaoxiang, a reporter at Hangzhou city newspaper
Metropolis Express said his editors chose not to cover the KFC
stories because safety violations are a bigger problem for
domestic companies.

"We believe that these international companies are already
operating in a relatively well regulated way, and compared with
many small Chinese workshop-style food chains, they are more
trustworthy," he said.

"Their problems are often minor compared with quality
problems at many local companies ... Media focus, rather, should
be on those ill-regulated Chinese companies."